Ask Steve Adcock the same thing and he’ll likely challenge the premise.
“Financial security is not the amount of income,” the 42-year-old told CNBC’s Make It. “For me, financial security is all about time.”
Adcock said he had a financially secure moment in 2016, at age 35, when he retired from his corporate job with about $900,000. Market gains soon raised that amount to over $1 million.
The security, he said, did not come from the money he saved, but what it gave him – the freedom to live his life the way he wanted without relying on a paycheck. When his wife retired the following year, the couple traveled the country in a Gulfstream RV for three years.
“We’re definitely living smaller. We’re spending a lot less than we are now,” Adcock said. “It was the first time I really felt financially secure, meaning we didn’t have to work for the rest of our lives.”
To be clear, a higher salary certainly helps when it comes to achieving financial security — but it’s not the be-all and end-all, Adcock says.
“You can make $200,000 a year, but if you’re spending $180,000 a year, you’re not financially secure,” he says.
In 2014, when Adcock and his wife were earning a combined $220,000 in annual income, Adcock said they saved about 70% of everything they brought in and invested aggressively in retirement and brokerage accounts.
“I would say our savings rate is borderline extreme,” he says. “But I hated what I did. I wanted to get out as soon as possible.”
If you want to be financially secure, you don’t need to aim for a high savings rate. At least start by building an emergency fund. A good portion of Americans — 44%, according to Bankrate — say they can’t cover a $1,000 emergency with their savings.
“It’s the opposite of being financially secure,” Adcock said.
Financial experts generally recommend setting aside three to six months worth of living expenses for emergencies. Once you’ve worked it out, see if you can increase the amount of time you can live off your savings.
“Once you get into the years where you can live for a year, then five years, then 10 years — that’s where the magic happens,” Adcock says.
Thinking about financial security in this way allows you to view money not just as an accumulation of money, but as a means of funding the things you care about in your life. If one has saved up a year’s worth of expenses, one can relax to pursue a hobby project. Those who have saved for 10 years may get the breakthrough of starting the small business they have always dreamed of.
For those pursuing early retirement, the ultimate goal is to build an investment portfolio large enough to withdraw permanently.
But even for someone like Adcock who still earns income from projects like his website, newsletter and recent book, reaching a higher level of financial security means not having to work but having the flexibility to work when and how you want. .
“I use the word retired loosely at this point. I wouldn’t say we’re necessarily traditionally retired, but we’re completely financially independent. We’re completely financially secure,” he says. “We don’t have to do any of these things. But it’s nice to do things that look or sound interesting and see how they work out.”
Want to make extra money outside of your day job? Don’t subscribe CNBC’s new online course on how to make passive income online Learn about common passive income streams, tips for getting started, and real-life success stories. Register today and save 50% with discount code EARLYBIRD.
Additionally, Sign up for the CNBC Make It’s newsletter Get tips and tricks for success at work, with money and in life.
#Financial #security #matter #time #money #selfmade #millionaire #retired